7 Ideas for Armchair Oil Spill Regulators

May 13, 2010 |
As we freak out about failed Blowout Preventers, it might help to shift focus to the fact that while we'd of course like to prevent blowouts, what we really want to control is spills.
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With the Deepwater Horizon's oil still hovering off the coastline, a legislative rush is on to "do something!"

Here are a few suggestions:

1. "No secrets" policy for disasters.
Congress should forbid companies from preventing employees from leaving the scene of an accident without signing a waiver of their ability to say what they saw or claim injuries. That's grotesque, and it gets in the way of preventing future similar disasters. Congress should also require that any chemical -- dispersants in particular -- that can be put in federal waters must list ingredients and toxicity publicly. If other ingredients are being added to the dispersant, they should also be listed. (This Greenwire article suggests they're using a more toxic, less effective dispersant than the best on the market. In effect, allowing information blackouts creates market failures that prevent the development and sale of safer, better products.)

2. Drill here often? Then register your ship here, too--and pay some taxes.
I noted yesterday that though Transocean was in fact a company largely formed in Houston, it registered itself in the Cayman Islands so it didn't pay U.S. taxes. In 2008, company brass moved to Switzerland, avoiding U.S. income taxes as well. Even more problematic, their drilling ships are registered in the Republic of the Marshall Islands, which is officially responsible for inspections but actually leaves the work up to a classification society. Under the Jones Act, only U.S.-owned ships can do coastal shipping. Do we want to allow "non-U.S. rigs" from "non-U.S. companies" to drill off our coasts?

3. Increase liability and require outside insurance.
Congress is already taking steps to increase the liability for oil spills from drilling above the current measly ceiling of $75 million. It would be even better to follow the model of OPA 90 (which followed the Exxon Valdez spill) and require all drillers/leaseholders to hold insurance for that liability, part of it provided by an outside party. Not only does this assure the public that the costs of a spill will be paid, it also means that insurers get in on the act of monitoring safety and risk and influencing corporate behavior.

4. Charge real money for our oil.
U.S. taxpayers are missing out on a lot of oil revenue because we charge far less than other countries for the extraction of our oil. Our offshore lease terms are so generous to the oil companies that according to the GAO, U.S. revenues for oil in the Gulf of Mexico were the 93rd lowest out of 104 countries, meaning we may be missing out on hundreds of billions of dollars in oil royalties when prices are high. A 2007 Wood Mackenzie study found that while some governments' take for a barrel of oil at that time was $98, U.S. citizens were receiving only $44.09 per barrel of Gulf Coast oil.

It would be a fantasy to think that charging oil companies less for our oil keeps oil prices low in the U.S. oil is fungible. Oil companies swap high-priced oil for low all the time, making money. And the retail price is all the same. Therefore, what we're increasing is the profits of the companies who extract the oil.

5. Install spill-capture devices before the fact.
As we freak out about failed Blowout Preventers, it might help to shift focus to the fact that while we'd of course like to prevent blowouts, what we really want to control is spills. How would you prevent an oil spill from a well before it happens? I'm thinking a giant rubber bag, like a balloon, pre-attached to the top of the drill pipe, and ready to be deployed if a well gets out of control. I'm sure that's ridiculously primitive, but the people who came up with this can surely come up with something.

6. Look at how Norway balances the needs of fisheries and oil production.
A huge amount of U.S. fish come from the waters of the Gulf. They need a high-level advocate. Perhaps the Department of the Interior could create a high-level Department of Gulf Fisheries that would have to approve all oil drilling plans in the Gulf.

7. Hold big public hearings to determine how this happened.
My first reason for supporting this idea from the Center for American Progress is that there are too many conspiracy theories floating around on all sides, and we need proof that someone cares about understanding the ugly truth, whatever it is. (Also, I must say I'm enjoying the pointed questions of Captain Nguyen at the Kenner, Louisiana hearings.)

My second reason for supporting a public commission is that at least since the oil embargo, Americans have understood our relationship to oil through the theater of public hearings. After the 1973 oil crisis, Senator Henry M. Jackson called oil executives to Washington and accused them of making "obscene profits." This recurring theater around price "gouging" persists to this day, as does the oil industry's comeback about environmentalists keeping prices high by preventing offshore drilling. This argument is no longer useful, and a public investigation of the Deepwater Horizon Spill would, in effect, give us a new and more relevant "play" for our political theater. This new play would be about "risk," and it would drill into the heart of every schoolchild the notion that every drop of oil carries with it risks that we as a society can choose to accept or eschew -- but we can no longer deny that they exist.